Any interest on tax refunds is taxable

Dec 18 2012, 10:17 IST
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SummaryThere is no requirement for your minor daughter to acquire PAN and file returns.

My daughter is 12 years old. My father-in-law, who passed away last month, left her an FD of R80,000. The interest earned on the FD is R8,000 per annum. Does my daughter need to acquire PAN and file returns on the amount of interest?

Gayatri Mathur

There is no requirement for your minor daughter to acquire PAN and file returns. Such income can be clubbed with the income of either the parents (when the marriage of the parents subsists) whose income before such clubbing is higher. If the marriage of the parents does not subsist, such income is clubbed in the hands of the parent maintaining the child. Also, the parent with whom the minor’s income is clubbed can avail an exemption under Section 10 (32) for an amount of R1,500.

I filled my returns for AY10, claiming a refund of R10,055. I received a refund order for a higher amount. The letter from the IT department bifurcated the balance as interest. Is the interest taxable?

Anup Roy

The amount in excess of the refund claimed is interest under Section 244A paid to you by the I-T department. Such interest is payable where any refund arises due to any excess payment of tax and is payable at 0.5% per month, or part of a month from the first day of the assessment year to the date of grant of refund.

The interest is taxable in the year of receipt under the head, ‘income from other sources’.

Is there a need to disclose agricultural income as it is fully exempt from tax?

Swaraj Kumar

Even though agricultural income is fully exempt, it needs to be considered to determine the slab rate applicable to an individual. On inclusion of such income with other head of incomes, the assessee will be paying tax at higher rate on his taxable income.

My new house is under construction for which I have taken loan. What is the tax treatment for the principal repayment and interest paid?

VK Ramaroa

The principal repayment is allowed under Section 80C and, hence, can be claimed even in the pre-construction period. However, interest payments are covered under Section 24 and such pre-construction interest is deductible in five equal installments starting from the year the construction is completed.

I bought 500 shares of a company, which I want to sell now. But my broker friend suggests that as I have held the shares for 11 months, I should wait for

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